The initial public offering (IPO) of Ujjivan Financial Services got a lukewarm response on day two with the issue getting subscribed nearly 0.75 times. The issue is likely to sail through as bids for 22.5 million shares of the total of 29.6 million shares were received.
The qualified institutional buyers (QIB) portion has been subscribed 0.61 times as they bid for 5.2 million shares against 8.5 million shares on offer. High net worth individuals subscribed to 32% of their quota, or 2 million shares of 6.3 million shares reserved for the category. Retail investors oversubscribed their quota by bidding 1.02 times for nearly 15.1 million shares against 14.7 million shares of offer.
The firm aims to raise Rs 358 crore through the IPO which is priced between Rs 207 and Rs 210 per share. The issue also includes an offer for sale of 2.49 crore equity shares by existing shareholders.
Ujjivan has already allotted 12.6 million shares to its anchor investors including Birla Sunlife MF, ICICI Prudential MF, Reliance Life Insurance and HDFC Standard Life Insurance, raising Rs 264 crore on Wednesday.
In an IPO note, domestic brokerage Reliance Securities said, “Post the fresh issue of Rs 3.6 billion, the company will be trading at a valuation of 1.6x P/ABV, which looks reasonable considering its strong growth potential. However, Ujjivan may witness a fall in its RoA and RoE in medium term due to transition into SFB. We expect, the new bank to deliver ROA of above 2.5% in next 2-3 years. We suggest “subscribe” from a long-term perspective.”
Ujjivan plans to convert itself into an SFB in the first quarter of 2017.